It’s A “Dry” Cold… (Part 1)

by Calvin McElroy, Guest Author

[Cal writes a funny and informative piece on the Canadian Venture Capital industry. The good news: Entrepreneurship in Canada is alive and well.]

I find it fascinating that many of my conference calls and business meetings inevitably start with a question about the current weather in Canada. Of course, we perpetuate this curiosity with our stories – say – about Churchill, Manitoba, population 1000 – where it can get so cold that the “sea” freezes and people leave their vehicles running 24 hours a day, so the motor doesn’t cease up. You can read more about the “Polar Bear Capital of the World” and North America’s primary seaport via the Arctic Ocean here.

The Canadian Venture Forum (CVF) was held in Toronto last week – and with unseasonably cold temperatures (-22 C), our weather was certainly top of mind with all the out-of-country delegates. Dr. Paul Kedrosky, a keynote speaker, calculated that a 42 degree swing in temperature from La Jolla, CA to Toronto caused him to be 1 mm shorter when he landed. More on Paul’s popular musings here. The Toronto cab drivers even needed a crash course in “ice dodging” due to the 3 square meter chunks falling from the CN Tower. This whole story here.

However, Canadian business people and entrepreneurs typically downplay or shrug off the harsh reality of our weather. In fact, the climate is credited (in part) for creating a hardy, resourceful, loyal workforce.

A “chill” is certainly a good descriptor when discussing the Canadian Venture Capital market. The CVF provides a great opportunity to get caught up with investors, advisors and entrepreneurs, who are otherwise geographically dispersed. This year, the tone of the keynotes and hallway discussions were almost depressing. A few sound bites:

• Rick Nathan, President, Canadian Venture Capital Association (CVCA)

In regard to health of the VC industry – “Canadian VC’s compete for institutional capital – against private equity (buyout) funds and mezzanine debt funding sources. Private buyout deals have increased from $2 billion in 2002 to $11 billion in 2006, while Canadian VC funding for deals has declined from $6 billion to under $1.6 billion in the same timeframe. Drilling into the numbers it is easy to understand the reason – top performing VC funds are delivering less than half the ROI of the top private equity funds. More importantly, history-to-date, with all Canadian VC funds accounted for – the sector has provided investors with a negative return on investment.”

(to be continued)

This segment is part 1 in the series : It's A "Dry" Cold...
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